Most owners of properties in Spain are not aware that they have an “imaginary” income when they own a property in Spain, which is not their main residency, meaning that Spain is not their country of residence.

Non-residents remain subject to this tax because, by definition, Spain is not their principal residence.

The imaginary income is the 2% or the 1.1% of the rated value of the property, which is stated in the Property Tax bill (IBI), just as if you had received this imaginary income in cash. The tax rate is 19%. The income is understood to accrue once a year on the 31st December and the filing period is throughout the calendar year following the year of accrual. Up to the 31st of December is time to declare for the “income” received in 2017.

Bear in mind that filing the Form 210 and paying the tax does not come directly from the Tax Ministry as with the Property Tax. Every owner of a property in Spain, which is not its principal residence, should be diligent, fill the Form and pay the tax of his own initiative.

The Spanish Tax Ministry (Agencia Estatal de la Administración Tributaria) is the competent authority to collect this Non-Resident Income Tax.

However, some owners of properties think that they are up to date with their tax obligations in Spain because they pay the Property Tax, direct debit from their bank account.

The Non-Resident Income Tax is different from the “Property Tax”, which is a local tax that is levied by the Town-Halls (not by the Tax Ministry) and it is billed directly and sent automatically to the owners on a annual basis, usually from June-July until September-October through SUMA, the collection authority depending on the regional government.

As long as you have a property in Spain, even though you are not a resident in this country, it is very practical to plan your inheritance in order to make it easier for your loved ones before you leave.

Making a will turns to be highly advisable in case you are a resident in Spain.

The reason for that is that the Ruling nr. 650/2012 from the European Parliament has changed from earlier,for those who died after 17th august 2015. According to this Ruling, your estate (no matter if the assets are located in Spain or not) will be governed by the law of your residence (Spanish law), unless you chose in your will that your estate should be governed by the law of your nationality.As an example; in case you and your wife are from UK but you both live in Spain regularly, your assets could be divided in a way that you did not intend for example your heirs (children) receive most of your assets and your spouse is not allowed to take over the assets. This could be avoid by making a will stating expressly that your testament will be governed by the law of your country.

Inheritance planning is beneficial both to save taxes for your heirs and to distribute your goods between them according to your will, whilst respecting the laws.

In case you have already make a will in Spain, you should check if you have clearly chosen the law governing your estate. If not, it is advisable to make a new will, especially if you are a resident in Spain.

The testament must be done before a notary. He will send the testament to a Central Register of wills in Madrid, so that when you die, and not before, your heirs will have access to the testament, even though they do not know whether you made a will or not, or where you did it.

A lawyer will advise you how to do the testament so that the assets will be distributed according to what you want and also assist you in reducing the taxes your heirs must pay in Spain.

It was formerly a common practice in Spain to declare a property sales price at a much lower than its real price in order to save money on transfer tax. The tax is always a percentage on the price.

If Tax authorities believe that your purchase is undervalued, they may send you a notice that the price has been re-assessed by them, along with a bill for how much extra tax you owe in concept of Transfer Tax.

First recommendation it is that you always set in the deed the real price you are paying to buy the property. No matter if the seller or, the agent recommends you to set a lower price to “save” taxes.

Even though the price in the Deed is the real price you are paying to buy the property, the tax authorities may consider that the market value of that property is higher. Therefore, they may send you a claim to pay the tax according to the market value they consider.

This re-assignment of value is based on market researches. They cannot afford to send a proper valuator to each property in every transaction to find out individually, the market value.

The Court of Justice of the Valencian Community and the Supreme Court in Madrid ruled, once more, that the Tax authorities could no longer asses a different value than the one declared by the seller and purchaser in the deed, as long as they do not engage a valuator who examines the property on site. This ruling is based on the idea of that, the primary purpose of a valuation is to recognize the asset on what the valuation is based on, as it is extremely difficult to evaluate accurately the building and the maintenance conditions of property without a preliminary recognition on site.

Many purchasers simply pay when they receive the letter from the tax authorities, even though they never declared a lower value than the real price they paid for the property. The reason for it is that they ask to the one who assist them when they bought, usually a real estate agent whereas it is a lawyer or, a tax advisor, the professional who will give you the best advice on legal and tax issues.

You always have the opportunity to contest the value assessed by the Tax authorities with no consequences, other than you will not have to pay the extra tax. A lawyer, expert on these type of matters, should make the claim. Ask a lawyer when you receive any notice from the tax authorities. They may save you a lot of money. This is a good example that the professional advice worth much more than what it costs.

The assets being inherited on death are in Spain even though the deceased was not a resident in Spain.

Inheritance tax is paid by the recipient. The tax rates payable are based on:

The family relationship of the recipient to the deceased

The wealth of the recipient prior to the transfer

There are some important exemptions on the taxable base and reductions on the tax fee that are different for each region of Spain.

The general principle is that the closer the family relation from the inheritor to the deceased, the less inheritance tax is to be paid.

In the Valencia region there is an exemption of 100.000.-€ per inheritor, provided that they belong to the closest family to the deceased, husband, wife, children or parents. This is a reduction in the taxable base, meaning that if, as an example, the deceased had a house in Spain, valued 200.000.-€, and the beneficiaries are 2 children, they will not have to pay inheritance tax as they will receive an inheritance valued at 100.000.-€ each.

For uncles, cousins and nephews the exemption is just 8.000.-€ (in round figures).

For other relatives, or those not related at all, there are no exemptions.

It may be that the house is exempt from the Spanish inheritance tax if the deceased was a tax resident in Spain and the beneficiaries are either the spouse or children or even a relative over 65 years of age, under some conditions. In all these cases, the inheritor cannot sell the house for 5 years from the date of death to benefit from a reduction in the taxable base of 95%.

However, the law requires all inheritors to make the inheritance tax declaration within six months from the death. Even if there is no tax to pay, because the beneficiaries have benefitted from the above relationship exemptions.

The Valencian Community has its own tax scale. The tax rates is set from 7,65 % on the estate value, up to 34% when the estate value is more than 781.000.-€ (in round figures)

If, despite the reductions in the taxable base, there is a tax fee to pay, there is also a bonus of 95% or 50% of the tax fee depending on the family relationship with the deceased, closest family or not.

You can also gift a property to your inheritors while you are still living, perhaps reserving the right to inhabit the property for as long as you live, but remember that the recipient of the gift is also subject to the Spanish gift tax.

This is one of the occasions where we find it difficult explaining a concept to our customers. When we say that “in order to match the description of your property to that described in your Title Deed, you have to make a declaration of new work”; “What’s new in my house, which has not been built for years and we have no problems?” … they usually ask, to which we have to reply it is an “old new work”.

What is a “new work”?

Obviously, everyone will understand what a “new work” is, is one that is being built or has just been finished; nevertheless, in the language of the law “new work” is all work without a trail, it does not exist according to the legal papers or it isn’t inscribed in the land registry (yet).

In other words, there are two types of declaration of “new work”:

“New work” in reality, which are those that are being built or have just been built (intent to inscribe)

“New work” for the world of the Property Registry, which is any existing work in reality and which should have been inscribed in the Property Registry, regardless of when it has been built. As an example, when the owner bought a house 20 years ago and afterwards he built a swimming-pool, a barbecue, a terrace, a new floor or a garage for example but, he did not reflect these changes in the deed, and therefore, they do not appear in the Property Registry (not inscribed)

The declaration of “new work” is a manifestation made in a public deed in which the owner or owners of a property state that, in that property, a building has been made or is being built, or it reflects an improvement of the property, with the purpose that said work is registered in the Property Registry.

Why register work in the Property Pegistry?

Well, there are some arguments beyond the fact that the Bank imposes it on you to sign a mortgage loan, because it is more than obvious whether the work is declared or not in the Property Registry, the work exists, and obviously belongs to the owner.

If you ever decide to sell the property the new owner will certainly wish to have all the existing work existing also declared in the deed.

However, if you do not declare the work and register it in the Land Registry, remember that: the one who buys does not have to assume those expenses; and that numerous appraisers condition the valuations to the new work being declared, being that the bank without appraisal does not grant mortgage loans.

To understand me, it is similar to trying to sell a car without papers, obviously, you can sell it, but the price will be lower: first because sorting through the documentation of the car is costly and a nuisance; but also, because there may be someone who doubts that the new work complies with the law.

It is strongly advisable to declare all the existing works in your property, included all in your deed and also, it is advisable not to wait until you sell the house to declare all the existing works because the planning regulations changes and it may happen that at the moment you decide to legalize all the works, in the sense of including them and updating your deed, this is no longer possible and then, you may face difficulties with selling your house.

The lawyer and the notary are the competent professionals in Spain to advise you in this process.

After 23 years of assisting Norwegians with the purchase of homes and land in Spain we can confirm that it is perfectly possible to invest your savings and purchase properties in Spain with absolutely no risk!

First and most important advice is Do Not Be In A Hurry! Probably, it has taken years to gather enough money to buy a house in Spain, and you should not spend it in just a few days. Take it easy. Spain is a very good place to invest your money and to spend most part of the year under the sunshine. But please be calm. The purchase of a property usually happens two or three times, at most, throughout a lifetime. It is worthwhile making this enormous investment with patience, security and calmness.

We realize that this is not always easy. Some vendors and some agents are extremely eager to close the deal when you have shown some interest in a property. The argument we always hear is that there is another interested purchaser eager to pay the deposit immediately so that if you wait too long you will lose the house. This has been always the same through the years. Even in times when the real estate sector was absolutely paralyzed in Spain. Moreover, we can say that, the fewer sales, the more pressure on buyers to sign the contract and make the first payment.

Keep in mind, that the first contract, the initial contract in which you make the first payment is absolutely binding in all its terms, price and conditions. Once that first contract is signed, you may not have the option to back out even if you discover that the house is not what you expected or, that there are some legal troubles affecting that property. The provisions in the contract might not be sufficient to cancel the contract and specially, to get your money back if the vendor do not agree with you. It may also be that the seller has made new constructions on the property, pool, garage or barbecue but that they never declared the new work done, and they do not appear in the title deed. You may face problems if you want to sell again and you are not able to add them to the deed because planning regulations have changed and it is no longer possible to extend the property legally. This is quite frequent.

Therefore, our advice is that before signing any contract or paying any moneys let a professional check ALL the legal conditions of the property, by asking for the information to the Town-Hall, Suma, Land Registry, Catastro, Community of owners etc. The reply from these institutions is not always as fast as expected. It can take days and weeks.

The provisions in the contract that the vendor will pay you back the money in case something is not in order, is not a sufficient guarantee. Your reason to not complete the purchase should be enough reason for you to cancel the sale. It may not be. Even more, the seller could compel you to buy even though you discover that you do not want that property.

The conclusion is that it is perfectly possible to buy in Spain without risk provided you engage a professional and expect it takes time to control the legality of the operation and draft a contract that is best in your particular case. Each client and each transaction needs its own particular contract. The professional, a lawyer, is the only one able to evaluate that the conditions in the contract cover all your interests.

We do not try to alarm you. On the contrary, we have assisted in thousands of transactions during more than 25 years with no unpleasant surprises, we just ask for time to do the job. Let the professionals work. Sometimes we have to not only fight against the vendor or the real estate agent but, also with our own client, eager to close the deal as soon as possible. We have a lot of responsibility if something goes wrong.

The main question is: What do you prefer?

To risk that someone else goes ahead with the purchase (what happens very seldom, but may off course happen)? or,

To risk your money and your peaceful dream? There are thousands of properties for sale in Spain.

Our experience is that people who rent properties believe that a standard contract is valid for all leases and that the conditions agreed in the contract are always valid no matter what the law says.

These two errors are very common and they can be very expensive and cause a lot of trouble for both the owner and the tenant.

In this article, we try to give some basic advice about the most common types of lease.

Number 1, we have the lease of “tourist accommodation” Viviendas turísticas. Since the entry into force of the regulation in 2015 of this type of lease, the owners who rent their homes have been panicking and been running to register their homes as “tourist accommodation” for fear of fines up to 90.151,82.-€ that the law hands out to those who do not include their properties in this special register.

However, not all rentals are considered “tourist accommodation”. Only those meeting the following conditions, number 2:

(1) When providing services specific to the hotel industry, such as cleaning, changing beds or doing laundry during the lease, and not only at the beginning or the end of the rental period or looking after the suitcases.

(2) When your rental is advertised through tourist channels such as web pages or tour operators.

If none of the above conditions are met, it will be considered an ordinary private permanent or seasonal rental and therefore, not subject to this special registration.

The most common rental is the private one, either permanent or seasonal. In these cases the owner is not obliged to register the dwelling nor the contract, in any register.

The fundamental difference between these two types of rental is that, if a tenant rents a permanent housing or habitual residence, the tenant has the right to occupy the dwelling for a minimum term of 3 years regardless whatever duration the parties have agreed in the contract. The law provides the tenant with a right to enlarge the rental period up to 3 years.

This means that if the owner has agreed a rental period of 1 year, the term of the year has expired, the tenant has the right to stay in the property for two more years, until the minimum term of 3 years, even if the owner does not want and wishes to recover the property for his own use. Under certain circumstances, this right of the tenant can be avoid.

For this important reason and others, we strongly recommend you to have the lease contract written or at least, supervised by a lawyer, who is the professional specializing on the law. Lawyer can save you a lot of money, troubles and headaches in the long run.

The first question to clarify is the difference between a resident and a non-resident in Spain, for tax purposes.

Many foreigners believe that they are residents in Spain because they live here most of the year. However, this does not imply that you are a resident in Spain in terms of tax residence.

If you live in Spain but your source of income for example is a foreign pension and therefore your government deducts your taxes from the pension you receive in your country, you are not a tax resident. Even though you pay the taxes related to the ownership of your property here, such as property tax collected by SUMA. It does not mean that you are a resident in Spain for tax purposes.

Apart from property tax, a Non-Resident owning a property in Spain is obliged to pay another tax every year, before the 31st December. This tax, called Non-Residents Income Tax is like a self- assessment, meaning that you will not receive an invoice from SUMA as it happens with the property taxbut, you have to complete a Form with your details and those of your property, calculate the tax, pay it and deliver the Form to the Tax authorities.

Our experience is that this tax is unknown to most foreign owners, but it is still a tax you are obliged to pay.

The reality is, when you sell your house and ask for the refund of the amount that the buyer is obliged to deduct from the price ( 3%), the authorities will put all kinds of obstacles in your way to try to keep the money and will charge you a penalty for the years you have not paid the tax.

If this is your case, now you have time enough before the 31st December 2017 to contact a professional. They will assist you in arranging the payment of this tax obligation, and they only need to see the last property tax receipt from SUMA. On the receipt, it will say the valor catastral, which isassessed by the authorities for your property and will be the one used as the basis for calculating this tax.

The first meeting is free up to one hour. Depending on the type of case, we can offer hourly rate, set prices, and monthly prices (for businesses only). We do not accept cases on a so called no-cure-no-pay base, or a pure % of the result. Normally we would be paid by an hourly rate, however we see ourselves as flexible regarding pricing, which means we may agree on a set price.

When you give us an assignment, the lawyer will have a right to be paid even if the case didn’t turn out quite as you expected, and at the same time the lawyer has an obligation to do the best job possible, in line with the judicial- and legal ethical rules. With us the client will always be safe in the knowledge that confidentiality is always respected and that we are 100 % independent in our advice.

Normal services, like secretarial work, copying, letters etc., is included in the price, whilst other cost and expenses we have in dealing with your case has to be covered by the client. Some typical examples will be: Burofaxes, translations, fee-based services, printouts from the land registry, Notarius Publicus, taxes etc.

Normally we would ask for an advance payment on account before we see the assignment as accepted. We would normally ask for 30-50 % of the estimated cost. The money is to be deposited in a client account belonging to Ripoll Abogados. The money will be used to pay expenses larger than 50 euro, and to pay towards our fees. The client will accept this without us first having to ask for consent.

Our estimated prices per 1st of January 2017 for works done by the partner in the office, is 150 euro + vat, a total of 181.50 euro per hour.

We normally will invoice every 1-3 months, and include a summary, but this depends on circumstances.